NEVADA CITY, Calif. April 16, 2024 – Today, the Nevada County Civil Grand Jury (2023-2024) released a new report on the Fire Safe Council’s handling of money received from Nevada County. The report, entitled Follow The Money: Fire Safe Council’s Accountability Problems from 2022 Continue … and Appear to Worsen, lists shortcomings, including an alleged absence of a California contractor’s license for the work FSC performs, being behind in both its federal and state tax filings, no published annual audit after 2020 and gross revenue, totaling nearly $2,000,000, having disappeared without explanation. The report also notes the FSC’s complete refusal to cooperate impeded the investigation but could not stop it.
The report lists the reason for a second investigation as follows:
The 2021-2022 grand jury investigated FSC and issued its report (“previous jury report”). That jury relied on an extensive review of publicly available FSC records, the testimony some of FSC’s directors and staff, the testimony of a whistleblower, and other research sources, FSC responded, and its inadequate responses caused the 2023-2024 grand jury to reinvestigate.
2024 Grand Jury report
The Grand Jury does not have general oversight over nonprofit organizations, but when Nevada County does business with nonprofit organizations, the grand jury does have jurisdiction to follow the trail of county money. PENAL CODE § 933.6. [source: Grand Jury report]
The previous report pointed to deficiencies in internal processes, and the current one picks up similar threads and adds more context.
Divided into four segments, the report identifies deficiencies in these categories:
- Financial management
- Apparent absence of required licenses
- Operational and financial transparency
- Board conduct and oversight of operations
Nevada County money constitutes a varying part of FSC’s annual revenue. The problem is that FSC’s records, as the following chart shows, vastly understate Nevada County’s annual disbursements to FSC.
The jury also compared financial revenue reports from three sources (two available on FSC’s website) for July-to-June fiscal years: IRS Form 990,financial statements in Board packets, and audits. (Some data are not available on the FSC website for the fiscal years ending in 2018, 2021, and 2022, as the asterisks along the x-axis indicate.)
External consultant report
In 2022, Nevada County hired CliftonLarsonAllen (CLA), a consulting and accounting firm, to study FSC’s work under two contracts with the county. CLA issued its report on February 8, 2023.
The conclusion of that report stated:
Based on the results of the analysis performed on the available information, CLA found no evidence of misappropriation of funds by Fire Safe related to the two County contracts reviewed. However, CLA relied on a limited production of information provided by Fire Safe.
CLA was only reviewing the billing asso- ciated with two contracts and simultaneously noted that it did not get all the information it requested from FSC. The report noted two red flags. The first relates to FSC.
During our interviews of the Fire Safe staff, including Jones, CLA noted a lack of adequate segregation of duties at Fire Safe due to the limited office staff. However, Jones stated that the Board Treasurer would review the payroll trans- actions that she performed related to her and her spouse, Wackerly, as a com- pensating control. While this does not replace adequate controls, [emphasis added] it increased the likelihood of fraud or errors being identified within Fire Safe. Since the completion of these contracts, Fire Safe notes they have hired additional staff and made changes to their processes to prevent Jones from per- forming day to day bookkeeping.
Thus, CLA confirmed that the segregation of duties problem identified in the previous jury report continues to exist. FSC had flatly denied this problem in it’s response to the jury report.
The second red flag calls attention to the county’s performance with respect to the two contracts.
It is also important that the County [sic] have adequate oversight and moni- toring of the grants administered by grantees such as Fire Safe. An inadequate control environment coupled with a lack of monitoring can create an opportunity for fraud or errors in the administration of the grant funds and lower the chance that they will be identified by the County.
This implies that the county had not properly overseen and monitored the two contracts.
The report also noted multiple instances of improper bookkeeping, including FSC bill- ing the county for two employees working 24 hours each in a single day and separately billing for 20-hour work days for two ground crew staff members. That represents four separate errors. CLA accepted FSC’s explanation that they were clerical errors. Four more errors occurred when FSC staff entered those figures in FSC’s system. The jury finds FSC’s explanation of repeated clerical errors not credible.
CLA made four significant findings.
- FSC continues to lack “adequate segregation of duties……. ”
- It found that the Executive Director had performed payroll transactions for herself and her spouse.CLA acknowledged that FSC had made a change in its internal controls, but CLA also found that the change “does not replace adequate controls.”
- CLA implied that the county was not maintaining “adequate oversight and monitoring ” and observed that the combination of lack of adequate internal controls at FSC and inadequate monitoring of FSC contracts by Nevada County increase the possibility of undetected fraud or errors.
The full CLA report is available on the county website.
Operational and Financial Transparency
The problem that the previous jury report noted continues to exist and has become more acute, the current report states. “FSC did not honor five document requests from the prior jury, asserting that ‘“’the documents to which the Grand Jury is entitled are available to the public as part of Board packets.’”’ That confirms FSC’s refusal to cooperate with the previous jury. FSC’s website lacked (and still lacks) numerous documents that FSC then said were available.”
“FSC withheld information from CLA’s review of two FSC/county contracts with respect to contract-management practices.”
FSC has reduced transparency in four ways, the last being the most dramatic.
- It stopped publishing informative documents in Board of Directors packets. For the Board meetings of April, May, and June 2019, the packets had copies of monthly statements from Tri Counties Bank and checks drawn. Immediately following, all three packets contained parallel statements for credit card transactions. That provided transparency. Beginning with the August 2019 Board meeting and through the present, no posted packets contain bank statements, check copies, or credit card statements. That reduced transparency both for the Board of Directors and the public.
- As of January 30, 2024, FSC had not posted Board packets for the Board meet-ings of February through August 2023 inclusive.
- Although FSC’s response to the previous jury report (Finding 5) stated that FSC has “annual external audits,” as of January 30, 2024 no audits for years after FYE 2020 appear on FSC’s website.
- FSC did not prevent the previous jury from interviewing some FSC staff. The 2023-2024 jury requested such interviews, but on January 3, 2024, the chair of the Board of Directors informed the jury by telephone that no one from FSC would cooperate with the jury’s current investigation. In light of the issues this report exposes, especially the financial ones, that refusal is very concerning.
Apparent absence of required licenses
The California State Licensing Board (CSLB) has established an extensive licensing system for persons and organizations performing work on property they do not own. Neither FSC nor any of its principals appear to hold any CSLB licenses. Given the extensive services that FSC contracts to supply, FSC must have at least one of three types of licenses: A (General Engineering Contractor), B (General Building Contractor), and C-49 (“known as a C-61/D-49 license prior to 2024”) (Tree Service Contractor). Among its services, FSC offers tree limbing to assist in creating defensible fire space, a service of obvious value in fire-prone Nevada County. Operating without a required license is a misdemeanor, but repeated violations can raise it to a felony. [source: Grand Jury 2023-2024 report]
Board Conduct and Oversight of Operations
This segment lists the FSC’s Board deficiencies according to the Grand Jury.
- A. Acting on Unseen Documents
- B. Adhering to the Law and FSC Bylaws
- Taking Action on Non-Agenda Items
- Unlawful Removal of a Director
- The Meeting with No Posted Materials
Grand Jury Findings
Finding 1: FSC does not properly account for large amounts of county (and other governmental) funding. This makes it impossible to follow the money.
Finding 2. FSC does not publish all and may not have conducted some annual financial audits. This makes it more difficult to follow the money.
Finding 3. FSC’s Board of Directors has allowed other questionable financial practices, such as voting on large non-agenda purchases, voting on audit documents not before the Board, and having pre-signed checks.
Finding 4. FSC’s day-to-day financial practices do not adequately protect against risk of fraud.
Finding 5. FSC does not appear to have appropriate California contractor’s licenses for the work that it performs.
Finding 6. FSC has reduced transparency, making it difficult for the public and the county to monitor and verify proper use of county funding.
Finding 7. From at least April 2019 through January 2022, FSC, knowing it was sub- ject to the Brown Act, appears to have violated it numerous times.
Finding 8. FSC has violated its own bylaws.
Finding 9. Fire Safe Council of Nevada County is not a responsible, accountable, or appropriate recipient for county (and other governmental) funding.
Finding 10. It appears that the county has awarded multiple contracts to FSC, without verifying that FSC had required licenses.
Finding 11. The county has not been sufficiently diligent about confirming the validity of contractors’ invoices.
Finding 12. FSC has had frequent, unexplained turnover of key financial personnel.
The Grand Jury also issued 15 recommendations and is requesting responses to their findings and recommendations within 90 days. Responses for findings 10 and 11 are required from Nevada County, all other findings require a response from FSC. The full Grand Jury report is available here.
FSC response
Jamie Jones, the Executive Director of the Fire Safe Council, provided the following comment on the Grand Jury report: “It is unfortunate that the grand jury continues to issue inaccurate, incomplete, and errored opinion pieces regarding the Fire Safe Council, despite their lack of legal authority of an independent 501c3 non-profit organization. In the continued interest of transparency to the community we serve, we will respond within the required timeframe based on the expert opinion of our team of legal counsel, CPA, and highly reputable independent audit firm.”
Nevada County response
A request for comment was not returned at publication time.
April 16, 2024 at 2:30 PM Editor’s note: We are working on a follow-up story on this and the FSC furlough announce. Factual reporting takes time (and resources) but we’ll have an update for you by Thursday.